Has Europe lost it ?
Nov 22, 2023
European equities currently trade at 20 times cyclically adjusted earnings, one of our preferred valuation measures as it uses the 10 year average historical earnings and hereby levels out short term earnings swings due to economic swings. This valuation is not only below the 40 year average but also compares to a valuation of 30 times for the US market on the same measure. Europe has its problems and European companies are growing slower than their US counterparts. We can however not believe the Old Continent has completely lost it and remain convinced the valuation gap will narrow over time creating opportunities for us as long term investors.